Over the past thirty years, China has led emerging markets on a road of ever-rising standards of living and development. The creation of mass middle class societies in China, South Korea, Taiwan, and Malaysia has been nothing short of remarkable. China accomplished this feat by making lots of stuff, beginning with textiles and getting more and more sophisticated until it became the monolithic manufacturer of iPhones and iPads that we all know today.
But, as robots increasingly replace human beings on the assembly line, the end of the well-worn development road is now in sight. The Financial Times has an incredibly stimulating read on the subject:
Guangdong is the growth engine of China’s manufacturing industry, generating $615bn in exports last year — more than a quarter of the country’s total. In this part of the province, the standard wage for workers is about Rmb4,000 ($600) per month. Ying Ao, which manufactures sinks destined for the kitchens of Europe and the US, has to pay double that, according to deputy manager Chen Conghan, because conditions in the factory are so unpleasant. So, four years ago, the company started buying machines to replace the ever more costly humans.
Nine robots now do the job of 140 full-time workers. Robotic arms pick up sinks from a pile, buff them until they gleam and then deposit them on a self-driving trolley that takes them to a computer-linked camera for a final quality check.
The company, which exports 1,500 sinks a day, spent more than $3m on the robots. “These machines are cheaper, more precise and more reliable than people,” says Chen. “I’ve never had a whole batch ruined by robots. I look forward to replacing more humans in future,” he adds, with a wry smile.
The proliferation of automation only adds to the uncertainty surrounding China’s economic future. China’s ability to deliver sustained economic growth on the back of factory work was already in doubt as a result of overcapacity and lagging demand. Add in robots and things suddenly look even worse for the hundreds of millions of Chinese factory workers trying to build middle class lives—to say nothing of the hundreds millions more who still live in rural villages. The story notes that China is investing heavily in becoming a world-class builder of robots as well, but such an industry requires high skilled workers, and as such is no answer for China’s swollen armies of the rural poor.
And it isn’t just China that should be worried. India and Southeast Asia have been hoping that as Chinese wages rise, companies will outsource to their countries in search of a better deal. Unfortunately for them, robots could make such moves unnecessary, dimming the futures of millions of people living in rural poverty across the continent. The past half century of global development and growth based on factory jobs and rising wages appears to be coming to an end.
Finally, this should be wake-up call for developed economies as well. If robots threaten jobs in China, where wages are low, they certainly threaten any hope of an industrial renaissance in developed countries. American politicians promising to bring manufacturing jobs back home are being either unrealistic or flat-out mendacious. And in an era of increasing automation, efforts to help people by immensely boosting the minimum wage are nothing if not counterproductive.
Rather than making irresponsible guarantees, politicians need to be thinking creatively about how to create the conditions for good twenty-first century jobs—many of which are still undefined. And this isn’t just an imperative for the United States or for Europe; it’s essential for emerging economies like India and Indonesia. For decades, developing countries have built up their own versions of the American economic consumer society. If the American Way no longer looks appealing economically, that could have serious implications for the future of the liberal world order.